The Ultimate List of What Belongs in Your Net Worth (And What Doesn’t)

Do you include pensions in your net worth? How about art, insurance, homes, cats, baseball cards?

These are some of the most popular questions I get asked, outside of “Is J. Money your real name?” (Yes) and “how did you get so damn sexy??” (I don’t know, it just comes natural! ;))

So today I thought I’d list out my personal feelings on it, and then everyone can chime in and let me know if they think I’m a big fat idiot or not. Although the reality is that we’d all be wrong, because:

THERE IS NO WRONG WAY TO TRACK IT!

Okay, well there is – you can’t call cash a “debt” or a loan an “asset” – but everyone here is smart enough to not mess that up, so what we’re really talking about here are all those *gray areas* that come into play. The stuff that might or might not belong in your wealth, but you just can’t tell and want an extra set of eyes on it.

So today, I’ll be your eyes :) And then you can take what you want from it…

Ultimately though, your net worth is only for you and your own goals/motivation, so as long as your tracking aligns with what you’re trying to get out of it all, then keep in mind you’re doing just fine!

Alright, so what belongs in your net worth and what does not?

Here are my thoughts… And keep in mind that I personally track my net worth to get an *overall snapshot* of where all my money/major property is at any given point in time. I don’t care about liquid vs not liquid assets, or taxable vs not taxable, or any other more specific ways to track wealth (cash flow/retirement/etc – those are for other spreadsheets). There are a thousand different ways to track this stuff, so again go w/ the route that makes the most sense for your situation!

Retirement Accounts (401(k), IRA, TSP, SEP, 403(b)): Yes! Now it may be worth noting which accounts are pre-tax and which are after-tax, as that will certainly matter as time goes on – especially for cash-flow/retirement purposes, but rarely do I see these guys not listed in at least *some* form of wealth tracking reports.

Stock Options: No. Options are worth diddly unless executed. Once you do execute them, however, then yes – all that $$$ goes right into net worth unless you blow it all on candy and gum drops (what are gum drops, btw?).

529 College Savings Accounts: Yes/No. It is technically $$$ you own, but it’s also earmarked for someone else to use later (usually, though you can also set up 529s for yourself), and at some point it’s all going to go out the window. So you can either keep it in your net worth now for an overall big-picture tracking, knowing its’ all going to be dumped out later, or you can just keep it out from the start, and then if you recoup any of it down the line just add it into your net worth at that point.

I used to include it in my own worth when we first started investing for Baby Penny, but after a few months (and asking y’all about it) I eventually moved it out as I just felt funny about it. I still track it though as you see in each net worth report, but I do so *outside* of my net worth section and just add it to another part of the spreadsheet since it’s still a big chunk of money to be watched over. So either way I think you’re fine with this one.

Income: Nope. It doesn’t matter how much you make or don’t make, what matters is *where it all goes* every month. If you use some of that income to save or invest or pick up property, then it’ll naturally be reflected in your net worth report once you do that! But if you spend every penny of it, then it doesn’t add a thing to your net worth, does it?

Pensions: Nope/Yup* After getting a lot of feedback from y’all and learning more about these magical “pensions”, I’m updating my answer here to include a tentative “yup” as well ;) Original answer is below, along with updated notes afterwards:

Nope – I treat it the same as “income” above. Although, if I’m being completely honest here, I’ve never really looked into pensions to see exactly how they work because I’ll never see one in my day! (Millennial alert!). So definitely wise to seek outside consult on this one… If I’m understanding it correctly, however, it’s just another form of income like a paycheck would be, which in that case would be treated the same way as above (i.e. if you save any of it it’ll be reflected in savings in your net worth, but if you spend it all then it doesn’t!). All that said though, of course pensions are AWESOME and should still factor into your financial/retirement planning, it would just go into a different spreadsheet in my opinion.

Any readers here wanna chime in though with thoughts? Do you include your pensions in your net worth? If you do, how exactly do you track it? Just estimate what it’s worth as one lump sum?

*Update: I’ve since learned that many plans allow you to see your “present value” for pensions, meaning that you know how much you’d get if you were to cash out today and get a lump sum (these are “defined benefit pensions”). So in that case I think it does make more sense to include vs *future* values or cash flows, provided it’s all vested and truly yours. I’ve also heard that some people pay into their pensions (which are “defined contribution pensions”) and thus will count *those* amounts only into their net worth which I can also get down with (again, provided it’s a guaranteed pay out).

So while my original thoughts were more based on the future *income streams* which I still wouldn’t include in net worth, I totally see how including any of these two routes above would make more sense and would probably do the same myself. And either way, it’s ALL good to track for retirement planning purposes whether it’s included in your net worth or not!

Bonuses/tips/lottery winnings. Nope Nope Nope.Unless it’s converted to savings/investments as in the above, none of it matters!

Houses (that you live in): Yes. This one is a healthy debated topic in our industry, and I can see both sides, but to me if you own something that’s worth/costs hundreds of thousands of dollars and is one of the biggest expenses of your life, then yes – it belongs in your net worth. ESPECIALLY if there’s the other side to the equation here, i.e. mortgage(s)!

I’ve seen people list one side and not the other, but to me that totally tilts it either super optimistically or super conservatively, and in either case the balance is just way too off for my taste. A home may not be a true investment in terms of *earning you money*, however, it’s still a pretty huge piece to your financial puzzle. It would be hard to avoid when factoring in all your $$$.

Houses/property (that you don’t live in): Definite yes! Wherever you side on the home or no home equation, everyone can pretty much agree that rental and investment properties most definitely belong here. In these cases they all operate as mini businesses that take in income and spit out expenses, and again you need both sides of the equation here to fully appreciate the bigger picture.

Cars:Yes. An even hotter debated topic than homes, however again – large expenses/values to me should always be included, as well as their very large expenses on the other end. Out of everything I track though, this would be the one section I could see cutting if there was a gun to my head. (Although in that case I’d just give the gun holder the damn car!)

I should mention a word on *valuing* here.

While it takes 3.2 seconds to dig up your loans on any car or house, it’s a whole other ballgame with how you value them. Some people like to use a specific site or group of sites to formulate a good estimate, and there’s typically a slew of different ways out there, but as long as you keep *consistent* in your tracking every month it should be just fine.

I use KBB.com for tracking my cars’ values, and when I used to own a home I’d literally just ask my realtor and have him run comps every 6 or 12 months or so. I always found Zillow to be wayyyy too chaotic and unrealistic for my neighborhood, so I just went straight to the person who I felt could give me the best info. So while cars were updated monthly, and still are, my home was always bi-yearly or just once a year. You never really know its true value for sure though until the day you sell!

(And interesting to note, my realtor was only off by $500 by the time we sold our place… And of course I went through him for hooking me up with the info over the years ;))

Stuff in your house (furniture, clothes, decorations, toys). Nope, nope, nope. Smart to know roughly what you own and its general worth for reporting/insurance reasons (a good idea is to walk around the house video recording everything once a year!) but in terms of net worth specifically, I always cringe when I see this being tracked. Usually because the #’s always just seem so inflated as if they’re listing the *purchase* price of their things vs the actual *value*. Just because you paid $1,500 for your couch, doesn’t mean it’s still worth that!

So if including your things is important to you in net worth, I’d just be more conservative and do your best to put a more realistic value on them… Ask yourself what you’d list them on Craigslist or eBay for?

Art/Collectibles/Coins/Baseball Cards. No. Unless you’re hoarding some Picassos or Mickey Mantles or the 1783 Nova Constellatio “quint” silver coin (the very first U.S. coin minted!), it’s probably safe to keep them out of the wealth tracking here. Again, except for insurance purposes. It doesn’t change how valuable any of our stuff is, just that $$-wise a lot of this doesn’t “count” until it’s sold and you have the $$ in your hand. And that’s coming from someone with a hefty rare coin collection!

Jewelry. Nope. I treat it the same as “stuff” or “collectibles.” Unless we’re talking big bucks here ($20,000? $50,000?) I prefer to count it later once/if it’s sold… *if* being the key part.

Insurances. Nope. At least not term life insurance and other similar non-fancy-investment-mixed-plans that people seem to get ripped off by… Just like my desserts and vegetables, I prefer to keep my insurance and investments separate ;) But we already covered that in another post… In terms of net worth inclusion, again unless this pays out and you get gobs of cash that you then put into savings or investments or property, I don’t like to include it here.

Businesses/Blogs. No. This one is probably the trickiest of them all, and one that I can see both sides of. But, personally, I like to keep my business stuff completely separate from my personal stuff. This includes bank accounts, property, taxes, stock options/ownership, debts, you name it. Until something activates and it crosses over into my personal finances (paychecks, funds from selling a site/business), it all stays on opposite sides of town.

It’s not as nice as having everything in one spot, but to me it feels much better keeping my two lives separate. I’m also someone who enjoys “nice surprises” every now and then, so I’d much rather see an increase in my net worth *all at once* when things activate over, vs. it slowly growing over time. And especially with valuations on your businesses, which can fluctuate daily! (For the good or bad!)

This is how I see it anyways, but would love to hear thoughts from other business/blog owners on this? Do you all keep your businesses in your net worth or also separated out?

Quarterly tax money. Nope. This is another tricky area as your taxes can mix both personal and business worlds together, but over the years I’ve tended to just separate this out under my business accounts and pay all my quarterly taxes from there. Initially I tried accounting for it in my net worth for the first few months of self-employment, but wow was that miserable! You had three months of this account (savings) piled up and looking pretty, and then BAM – quarterly payment time and it all goes down to $0.00! The worst! :) A couple rounds of doing that and I was convinced it’s better to just keep it all separated vs. watching the yo-yo over the months, haha…

Loans: No. This is a strange one to put here, but seeing how when I first started tracking my money I used to include it myself, I figured I’ll just throw it out there in case others are doing the same thing… Don’t! While someone may *owe* you money and you’re hoping/convinced that you’ll get it back later, you never really know and better to count your chickens only after they’ve hatched. I think I’m 3 for 4 out of all the family loans I’ve given out of the years, but honestly if you can’t afford to lose the money you probably shouldn’t be loaning it out anyways.

(I’ve heard people say that they only “gift” people money when needed vs loaning it, and I always thought that was a cool – and selfless! – way to help someone :) Again, provided you can afford it!)

*******

Alright, I think that hits a lot of the gray areas?

Let me know if I missed anything, and I’ll go back and update this…

Also keep in mind – mainly when you’re trying to compare your own situation with others, because let’s be honest, we all do it! – there’s a TON of other variables that come into play with why someone might have a smaller or larger net worth than someone else.

Such as:

Age of the person

Whether they’re married or single (and if they’re tracking it separately or combined?)

How many kids they have

Where they live (ie. high cost of living or low cost of living?)

When they had their financial *epiphany*

Did they inherit anything?? (Nothing wrong with that, it’s awesome!, but of course it can affect your stockpile)

Their profession/goals/dreams

And lastly, a quick note which hopefully y’all already know by now:

Net Worth ≠ Self Worth

Yes we talk about $$$ every day here (because we’re a money blog!), and yes we obsess about numbers and our goals and dreams and being able to retire early so we can do whatever we want to in life (the whole point of money), but at the end of the day our net worth is only an indication of our dealings with money itself. Nothing else.

There are people with big hearts changing the world who are dirt poor, and then there are millionaires and billionaires who are complete dirt-bags (look at that play on words!). So do keep paying attention to it all, but also remember that it’s only one part to the equation of life. The rest is, well, actually living! And a good life is the best reward of all, right? :)

Now tell me what you think about all this! What did I forget or miss the mark on?

I’m hoping to make this THE post that I share with everyone in the future anytime I’m asked about this stuff again, so leave as many thoughts and opinions as y0u’d like as it’ll all help generations of future readers to come :) No pressure!

Thanks for reading the blog and making our community great.

*****PS: Cats. No, cats do not belong in your net worth.

The Ultimate List of What Belongs in Your Net Worth (And What Doesn’t) was last modified: December 28th, 2017 by J. Money

oh wow, not even the emergency fund eh? i count all that ‘cuz it’s cash money, but i can see leaving it out going the “earmarked” way… although, in that case isn’t ALL your money earmarked? For future retirement living? :)

This is a good breakdown of the gray areas for sure. We do include our cars and house, and while we use KBB to estimate the car value, I didn’t think about getting our realtor to tell us the house value yearly. We have stuck to the value we go it appraised for after buying it.

Thanks for the tip on that!

PS. Gum drops are a chewy candy, kind of like gummy worms, but in a drop type shape. And coated in sugar. You’re welcome :)

I agree with most of the items you outlined and their groupings. As Ms99to1percent mentioned above, you should list all assets and liabilities out. I understand they might be earmarked for different purposes, but they do contribute to one’s overall net worth.

So for example with your stuff / items in your house, I agree you wouldn’t list this as an asset (one could argue to do so, but I wouldn’t). I’d definitely add the stuff as a liability though if things are financed on credit, etc.

Great post, sir. Tender vittles for thought. I do include the value of Mrs. Cubert’s business since that’s some big for real money built up into a practice over the years. Who wouldn’t want to claim that patient base? I don’t track our auto values but see no issue with doing so. I should just count them, but I hate how they depreciate. Bikes on the other hand? Definitely include those. ;-)

On pensions: I can see both sides of this one. I think you definitely need to factor in your pension (once you reach eligibility for it) to your net worth, because (a) it is something of value you’re eligible for, and (b) failing to do so might cause you to work extra years when you could have retired had you factored the pension into your planning. On the other hand, it’s hard to get a grip on what it should be “worth” in terms of your net worth.

Regardless, if you have a pension, you should probably factor it as a bond in determining your investment risk profile, since it’s (in theory) a dependable, relatively safe form of income in retirement with little risk of disappearing entirely (particularly if guaranteed by the PBGC or backed by a state). That means if you have a pension (that, again, you’ve acheived eligibility for!), you should probably tilt your investments a bit more towards stocks since the pension (like Social Security) is pretty “bond-like.”

As to other thoughts:

Car: I’m one of those folks that has a car loan (gasp, the horror!). I’ve set my car’s worth as literally equal to the balance of the car loan. Now, in terms of net worth, this means when I make my monthly payment on the car and reduce the balance, my net worth remains unchanged (except for the loss of the money used to make that payment). But that’s fine — my thought was that a car really shouldn’t be an “asset” even if it is one, but at the same point it’s worth something and should factor against that car loan (which is DEFINITELY a liability in terms of net worth).

House: I have a rental house and a primary house. For the rental, I use Zillow — yes, it’s a crapshoot that swings wildly, but technically so is the value of my entire stock/bond portfolio until I actually access it/sell it (until I sell, what the market “claims” my 401k portfolio is worth is pretty much a guess). For the primary house, I use the original purchase price. Why? Well, it’s a VERY conservative estimate of its worth (values in my area in the 2 years since we bought have gone up considerably), but also doesn’t give me a crazy/distorted view of my net worth based on house equity that I really can’t tap without losing my place to live. So, whenever I pay my mortgage, my net worth each month for my primary residence increases by the exact value of the principal I paid down. Easy peasy, and conservative for planning purposes (when we sell, we’ll of course get to realize any awesome gains in value on our ACTUAL net worth statement).

I can get down with all of that. Especially with how conservative they are (better to get a GOOD surprise later than a bad one, eh?).

I also agree that pensions need to be factored into retirement planning/calculating too – just maybe in a cashflow/other spreadsheet type of way? It would actually be cool to create a spreadsheet of all income like that *now* to see what would happen if you were to quit your job today and try to live off it :) Especially with all the different dates of when you can pull from where, etc… Would be an excellent exercise (and could even update it monthly or quarterly to like w/ net worth!)

I do count my pension. In our case it has a lump sum payout amount I could call her tomorrow and cash out. Given I could cash convert it tomorrow it must be worth at least that. We don’t count the house we live in since I have no intention of moving. Also no to cars as I hold them until they are worth little to nothing.

The one I struggle with the most are RSUs. Unlike options they have value. They just are not entirely yours. In my case as long as I don’t voluntarily quit or get fired for cause they are mine (layoffs don’t count)

That’s cool you know what your lump sum payouts are like that! I assume it’s less if you take it all now vs later and getting the spread out payments? Can you take the pension spread out, and then later change your mind and get a lump sum?

Unfortunately it’s a once and done decision, but the longer I wait the larger the lump sum gets as the present value increases. At present I calculated it’s accrual pre-payments at roughly 5% a year (This is less employer contributions as my employer has cutoff new contributions effective this year).

I struggle with RSUs, too. My strategy has been to include them once I become vested. I leave out the unvested shares because unlike Full Time Finance, I can lose them if I get laid off (which can happen at any time). Full Time Finance, I assume you include your unvested RSUs?

I include only what I have contributed into my pension, as that would be mine if I were to leave. The two pensions I’m in only give me my contribution plus the interest on it (on an annual basis). However when looking at retirement it is hard to calculate it in as I’m still 18 years away from being eligible and a lot could happen between then and now.

I’d count in the money stock options. If you can cash in on it today, I can’t see ignoring the value. I don’t count social security yet but plan to once I get closer to it. As of now, I have no way to accurately predict the value of SS 35 years from now. I don’t count my car (it’s 11 years old) or my Jewelry. I’d count the jewelery before the car though because in theory the jewelry will appreciate from what it’s worth today and the car will eventually be worth nothing.

We have a small pension we don’t count as part of our net worth. Some view a pension as an annuity, calculate the value, and add that to their net worth. What’s important is to keep your categories consistent so that you’re comparing apples to apples each month (day?, hour?)

That was a longer than usual post J! Hard topic!! The first very two sentences totally made me chuckle, and it’s only 5AM!!! Goooood morning to youuuuu!

I never looked into pensions either, I thought it would be counted as net worth because I thought it was just another retirement thing, like a 401k? I have no clue, millennial here. Income definitely shouldn’t be in net worth, that’s just weird.

Have you tried Redfin for house estimates? They’re closer because they’re an actual MLM. Although Zillow isn’t too far off and they cover more data geographically.

I think we’re a near 100% match on our idea of net worth, yay! Except I take away $1000 for my dog. She’s a liability. Cats = -$5000. Just kidding :p

I do not count cars, a Dali Lithograph I inherited that is worth a few grand, or my Signed 1/1 Carson Wentz rookie card. My wife has a pension that will pay $64k per year in 11 years. I don’t count the future value of the pension. I only count what is current value of the pension is today if she cashed it out, but we would never do that. I paid $1k for our yorkie. He was supposed to be 5lbs, but grew to be 15lbs. Idk if that makes him more valuable or not.

Good post, J Money! I keep my calculation ultra simple.
Retirement savings plus personal savings/investments= net worth.
I don’t count my house or car, but I have house and car payments, so it equals out. I don’t count emergency savings or money in my checking account.
Cats fluctuate in value, depending on whether they are purring beside me or destroying the furniture, so I don’t include them. :)

Ahh so you just don’t count the house and the car’s debts either in the calculations then? I’ve seen some people include them *without* their respective values and it throws it way off! Too much for my blood :)

I personally don’t calculate cars or my home in my net worth. Mostly because, well, right now they’re dragging down my net worth! But once both are paid off, I still don’t think I’ll include them for my own purposes.

Options should be included in the net worth calculation. It’s just like stock. It’s worth something and should not be ignored. Well, just count the options that are already vested. Don’t count anything that’s not vested yet.

Pension should be counted as well. I have a very small pension and I could take it out as a lump sum. $20,000 or something like that. Why shouldn’t I count it as a lump sum?

Yeah, the business is a tricky one. I just started counting it this year. I’ll have to think about this one more.

I don’t track the value of my vehicles because I plan to drive it to the ground. When that happens, it’s worth zero.

I don’t include the value of government pensions, even though I pay my dues with every pay. My thought in this is that I don’t know how much money I will get when it comes to my turn to get it (I have a bias that the baby boomers will exhaust all of it). If I get it when I am of retirement age, it’ll be icing on the cake.

I don’t include the value of my company pension either. The reason being is that you never know what will happen to it from now till your retirement date. I believe that the organization that I work for is financially sound, but I would rather count the value of things that are in my possession and control. Once again, it will be a great surprise if I get something when I retire.

Great post J! I agree with you for all the criteria except for housing I count the municipal assessment rather than a realtor appraisal. Through the realtor appraisal would be more accurate, I just don’t like them around too much haha :) also for pension the commuted value is ok to add (they are your contributions into the plan)- I add it to the side to keep track of it. I wouldn’t count the blog either in the update, but what’s the going rate 10x monthly earnings or something like that? Once it’s sold (like I did with mine previously) I added the cash to my update.

I don’t understand the logic of not including a primary residence. Yeah the cash is not easily accessible but it is still an asset. Even though its value is an estimate, what you think you can sell for and what you sell for are not usually that far off.

I do not, however, think its wise to include (primary) home equity in your retirement plan.

I agree with so many posts here on vehicles, primary residence, all that kinda stuff… but the art/collectibles/jewelry category makes me scratch my head a bit. My wife and I have sunk about $14k into musical instruments, most of which we use weekly or daily. If I wanted to, I could monetize them for about $12k without any difficulty; they’re either rare or appealing or both.

I guess I should take a lesson from Leo T. Ly up above and treat them like cars. If it ever comes time to sell my horns, it’ll likely be due either to debilitating injury or death (my own).

529 accounts should definitely be included as assets. They are in your name and you have 100% control over them. The account has a direct impact to your present and future net worth. Yes, it’s earmarked for your kids but so is some of the money in your bank account that will be consumed by your kids. Treating them as ‘bills’ is tantamount to listing your grocery expenses as liabilities. It doesn’t make sense to exclude it on your net worth calculation.

I’m going to caveat your house thing. While yeah, it’s technically part of your Net Worth, I wouldn’t ever really use it to determine if my net worth were high enough to support my retirement, because I’m not planning on selling or using the equity in my home for retirement.

I think that’s something a lot of people may overlook if they’re just starting to get a grasp on their net worth and the prospect of retirement.

If I’m not going to liquidate something, it’s not worth factoring into my retirement thoughts. If I am, then I have no qualms about throwing it into the calculation. That’s why I don’t include my car, either.

Yup – it’s all about *why* you’re tracking it and what you’re trying to get after. If you only care about retirement $$ then it makes more sense to exclude houses/cars/etc, but if you’re looking for an overall *snapshot* – like I do – then it prob. does make more sense to include. So def. good to ask yourself the main reason behind tracking so you can better align what fits in with it and what doesn’t.

I don’t include my pension in my net worth even though it will allow me to retire early and have some piece of mind. It is not in my possession and I am not in charge of it. When I retire, I will be given a paper that tells me what I will receive every month till I die. It is income in my thought. My thought is that it could disappear and I will have to access my backup plans, private investments, 401K, and IRA. That is why I built up the other areas and don’t just count on pension.

On pensions: my job has a pension plan that gives us the option to either take the monthly payments or do a lump sum cash-out. The latter is especially helpful if you worry about the longevity of the pension plan or just want to be able to rollover the amount into your other retirement accounts. Since my annual estimates give me both the monthly amount and the lump sum value, I include the lump sum in my net worth.

Agree with all of your points except the pensions one. And my disagreement here is only partial.

Pensions, as you know, are incredibly complex and come in many, many flavors. For example, my company pension is a Cash Balance Pension which can be converted to an annuity (100% or 75% or 50% joint survival) or taken as cash (immediate lump sum and taxed heavily or roll it over into an IRA). The cash balance has been growing over time through contributions my employer has been making. I get a quarterly y statement and can monitor growth on a regular basis. Higher contributions with more years of service – the ultimate golden handcuffs!! Ha ha! So I definitely include the number in Net Worth.

For those with only an annuity based option, I agree that it is not Net Worth, but income flow as part of a drawdown/capital preservation strategy.

I feel like my firm is one of the last ones still offering a small pension benefit for new employees. So, at least one millennial has seen it in the wild!

My firm gives us the cash payout value for the pension balance, and I do include that cash value in my finance spreadsheets for tracking purposes. However, I don’t include it in my net worth calculations yet – it doesn’t vest at all until I have 3 years of service with this firm, so even though they’re contributing to it in my name already, it’s really not “mine” until I hit that 3 year mark. Once I hit that milestone, I’ll start including it in my new worth. For now it’s just sitting there, kind of taunting me, haha.

I do factor in my pension, albeit at a reduce value (I’ll explain). Just a comment though-lots of Millennials have pensions! Most Federal, State, and Military folks of all ages have them, so just not many public sector folks. Side note, if you were to work for the Fed for 5 years you would be eligible for a pension. It would be a small one, but still….

A pension is different from income because it is guaranteed (as guaranteed as anything is these days). If you got fired from a job, that pay (income) would stop so agree it is not an asset. No matter if you quit your job or not, a accumulated pension would still be paid. Its a guaranteed asset. You can stay in bed all day long and that money would continue to roll in month after month. If a pension is not an asset, then would you consider an annuity one?

I’m 50, so no plans to retire for 15 more years. If I was to retire today I’d get a pension of $2850 a month. When I retire in 15 years my estimate would put it at 3800 per month. I plan on taking a survivors benefit, so when I die my spouse would continue to receive. That takes my pension down to around $3500 a month. For my planning purposes, I always undervalue things so I am never surprised, so I value my pension at $3000 per month or $36,000 per year. For my planning purposes, I know that starting at age 65 I will have $36k (inflation adjusted) pension in my bank account every year.

Good call on millennials in the Gov’t… in fact, my wife works for the govn’t and just remembered something about her pension down the road, haha… we’ll have to see if I end up including it later :)

But I totally agree on accounting for it for sure. I’m mainly wondering if you do that in the *net worth* though or other planning spreadsheets? I.e. Do you put a lump sump into yours based on your $36k/year? And if so, how much?

I like the idea others have shared about grabbing the “present value” of them if you were to cash out now. Do you have that option on your end too?

Hi J,
Going to weigh in here. Good article though I’m going to disagree in a couple of areas.
First, cars- To me, it’s like stuff. It’s like options so to speak in that there is no actual cash value until you sell it. Cars are a necessary evil. Frankly, I prefer bikes.
Homes- Interesting that the govt doesn’t include it in people’s net worth. Not being a fan of the government I’d say include it. I’ve waivered on this one for a long time. Since, unlike cars, it’s increased in value and there is a huge demand where I live,( coastal southern CA), I now include it.
Pensions- While it’s true it’s a form of income my state teachers pension is guaranteed. If I took it this month (hmm..thinking about it), I would get $70k a year. I could take a lump sum and get a few hundred thousand but it’s more valuable taking the pension. Another reason I include it is if I use the 4% withdrawal rule I would need 1.75 million to generate $70k a year. What if the market tanks? I don’t have to worry about that. Another caveat is you can set up a beneficiary to receive all or part of your pension. Since I’m divorced (her loss- as far as the pension goes), I’ve set up my two daughters as beneficiaries and am taking a bit less. Without that my pension would be around 80k. Would be glad to elaborate more for you on pensions if you want. Regards.

In regards to your question yes I now figure my pension in my net worth. Figuring a 4% withdrawal rate that would value it at $1.75 mil. I realize some will disagree and that’s fine. I don’t factor in social security. I figure what little I get from other jobs outside teaching is just future beer money.
Also it’s easy for me to figure the net worth of my home. It’s a townhome and I have two recent comps,(exact same model)to compare it to. When figuring the equity however,(it’s paid off), I minus what would go to commissions and closing costs.
Technically I reached FIRE six years ago at 51. I just didn’t realize it at the time. Keep up the good dialogue J.!

I kind of do this in “layers”. For my day-to-day mental accounting, I just include cash savings versus current credit card balances and other accounts due within a month. For a little bit of a bigger picture, I add liquid and quasi-liquid investments (including retirement accounts), and subtract non-credit card fixed-rate loan balances that are on auto-pay (like student loans). Finally, for my “true” net worth, I try to compute most assets and liabilities, including my house and mortgage.

I never include personal property, just because used stuff is hard to valuate and I don’t own a car (I’m something of a contrarian and lease).

I’m surprised you didn’t include a coin collection in your net worth. I get your explanation on how you wouldn’t include that until it was sold and added to savings, but wouldn’t that be the same as a house or car? You do include those even though you’d have to sell them to add to your savings?

If we were talking a TON of money here I might include a conservative estimate of it, but for some reason it just feels the same to me as other “stuff” – even though they’re much more valuable. I guess I just prefer to account for it later if/when I ever go to sell it :)

Hey-o, pensions, now you’re talking my language! As someone who is working towards a substantial ($50k+ per year) pension (and I’m a Millennial! An old one, but still), I do NOT count my possible pension in my net worth calculations. This is actually something that has come up a lot lately in military forums, so I’ve had time to suss out my thoughts on it. There are a few reasons why I don’t.

1) While I am likely to receive a pension, I have not yet reached what we call “sanctuary” where I am safe from being subject to manning cuts (lay offs). I’m even further away from vesting – the military has a 20 year cliff vesting period. So I’m fairly confident I’ll receive a pension, but there are still a few things that could go wrong and leave me with nothing. Why count something I may not get?
2) Pension programs may be promised to you, but they don’t belong to you. I can’t take my pension and decide to invest it in a house or Caterpillar stock or my buddy’s restaurant. I can take the income I derive from the pension to do that, but I can’t take the whole pension to do that. I will have a one-time opportunity to pull out all of the money once I retire (Congress is currently deciding whether we should have annual opportunities instead of a one-time shot) but other than that – nope. Contrast that with the other things you include in net worth, which you have physical and legal control over. It’s not the same, IMO.
3) How do you value a pension? Do you use the 4% rule (multiple the annual value by 25)? Or do you value it higher based on how secure it is? A military pension is one of the most reliable things you can count on in this world, so should I instead assume a 3% withdrawal equivalent (multiply by 33)? 2%? 1%?
4) I think people are focused on the wrong thing when they are looking at their net worths. Many people want the largest net worth possible – but the only reason to want that is to use it as a measuring stick against others. Your net worth should be about whether or not you can derive income to retire and/or meet other financial goals. So I don’t need the mental boost of artificially inflating my net worth number. Instead, I need to be focused on how well my net worth can fill in the gaps that my pension might not cover. (I have more to say about that but it’s part of an upcoming post, so I’ll leave it there for now).

TL;DR: I’m on the side of not including a pension in net worth calculations unless you can take its cash value right now. Since I can’t, I don’t include it.

I take a simplistic assets minus liabilities approach to net worth. So I would include a business or pension (present value only) in my net worth. I do have a small pension with a cash out of about 50K, which I include. I don’t have my own business but would also track it in my net worth if I did. I see it the same way as a stock. A business worth 1 million today may be worth 500K or 1.5 million a year from now but so can your S&P ETF and that’s included. I just wouldn’t use the value of my business or house for that matter in retirement planning. I guess I would define investable assets differently from net worth. I figure net worth is what I leave my heirs if I was to depart this mortal coil tomorrow. As you quite rightly say, there’s no right or wrong way to look at it.

Oh and I do have a Mickey Mantle, just not his rookie or one of his high value cards Last I checked, it’s worth a few hundred but really not enough for me to include as a real asset that I will sell to fund retirement.

Good way to look at your net worth too… I suppose if I were tracking it in the same vein I’d include many of the things I’m omitting right now as well. Such as my coin collection and blog entities. Fortunately my family knows allll about them both as I talk about them more than they wish (hah!) but they’d have to dig deeper to find my nerdy spreadsheets on them to be able to determine their values :)

Yeah pretty much agree with 99% of the allocations of net worth. I would include art if valued in the thousands, because you can use the funds on the day you decide to sell. Maybe you can do a Jmoney biz net worth and include this multi million website on that spreadsheet.

I agree with you on every single item on your list and whether I would or would not include them when calculating my net worth EXCEPT for the car (though you did admit you would cut this in a gun to head situation).

I know the car value depreciates once I drive it off the lot of the dealership and will just continue to depreciate daily thereafter. I don’t include it in my net worth calculating because the dollar value keeps dropping. Plus, even if I ever did need to sell it for cash quick, I would need to buy a replacement (new or used) at some point anyway – though living in NYC, one can argue I don’t really need a car. haha

I think there is a distinction on pension that can be made here. Some companies offer a type of pension called a defined contribution pensions in which they put a set amount of money into an account per year (much like a 401k match) instead of a defined benefit where you get a certain amount per year. In that case I would totally put the pension in as part of the net worth since it’s a stated value rather than a set amount of income.

I would totally include my cat in my net worth. If I sell him right now along with all his belonging in FB marketplace, I bet i can get at least $30 for him :) Some people I know paid about $1000 for their cats….

Talking about 401k, with current news, there have been arguments toward ROTH is better than 401k so we don’t have to rely on the the temperamental of our beloved government. What is your thought?

My thought is that the FREE MATCHES from 401(k)s trump everything so I’m always rooting for them, however if there were no matches involved then I’d prob switch my attention to other vehicles since at least you get to control those more and choose your own funds. Though setting up automatic contributions similarly to 401ks would still need to be activated as without that most people would have zilch in their retirement :(

I include my company ESOP (employee stock ownership program) in my net worth calculation. As a small business, we can truly affect the stock price of our ESOP and it instills a good team work atmosphere at my company.

I think I’d include that too in my net worth – but that’s different than stock *options* right? Where you actually own the stock already at a discount vs *the chance* to buy it at a discount but haven’t pulled the trigger on yet? (I.e. haven’t shelled out the money yet to lock in?)

Fun article (although I decided not to tell my cat your opinion on whether he should be included in my valuation of my net worth)! I do have a pension but I don’t calculate it into my net worth. Instead, I consider it when I set my savings goals and how much I want to have as income in retirement. So, if my pension today is worth $15,000 a year when I turn 62, it means I don’t have to have quite as much saved since I don’t have to be responsible for replacing all of my income.

Hi
Nice list.
1. I do include my business in my net worth because it is an asset that can be sold to someone else and there are valuation firms or accountants who can provide this service. Why would it not be part of my net worth? How do you think all the tech millionaires generate net worth – based on the value of the stock they own in the their business. Of course their stock may be publicly traded but even it they are not, the value of the business can also be independently determined. However it is important to ensure the business assets and streams of income can be quantified by a professional.

2. I do include jewelry in my net worth because I have a sizeable collection of gold and silver. I have an inventory with the weights of each piece and the stones so I know at least the value based on the current price of gold. It is useful to have some of your net worth in gold and silver. These can be passed down to your heirs.

I have over $400k in vested stock options that I could sell right now. Why would I not include them in my net worth? As part of my long-term incentive plan I get new options from my employer every year. The options vest evenly over three years and have a max holding period of 10 years. My strategy is to maintain the optionality value and continue to execute them in between years 7 and 10 post-issuance.

If I do not include these I would have a very different net worth picture. I also do not want to exercise these too early as I would be giving up the value of optionality. The company I work for is very stable, has had tremendous growth over the last 30 years and plays in markets that are essential to humans and will be well into the future so not an exceptionally high level of risk associated with the underlying stock.

Maybe I’m confusing the “options” part, but in my experience – at least with the ones I currently have – they’re all worth $0.00 until I pony up the money to buy them, in which case they turn into assets I own and would then go into my net worth (and similarly the money I spent to pick them up would go out! :)). So for *future* net worth/retirement planning I’d still count them myself and watch over and love them!, but for current net worth I guess to me they’re not *mine* yet.

If you’re sitting on $400k already though and are vested, you already own them and they’re just stock-stock now, right? If not, and let’s say you have to pony up $100k to activate them – whether now or later – how do you account for the $100k loss in the worth? (btw, not hating on anything here, just genuinely curious :))

Here is an example. I have 10,000 options. The Strike Price is $100 the Stock price $140. If If exercised today I would pay $1,000,000 but I would receive $1,400,000 back as soon as I sold the underlying stock. I could do this all concurrently so I would not have to pay the $1,000,000 if I chose. Or, I could choose to exercise the options and pay the $1,000,000 but I would now be holding $1,400,000 of the underlying stock. Either way that is $400,000 of value to my net worth, Does that help?

When looking at planning calculators, it is tough to include a pension.

I’m a Texas educator and TRS is really good…or at least I think it is! Average of top 5 salaries*.023 multiplier*years of service…vest after five years and retire at 80 (years + age)..it is a sweet deal for a career educator…

So with that, when figuring net worth, I figure cash value even though it is “worth” a lot more than that to me

I agree with James at Penny Wise Dollar Wiser when it comes to cars.
I would designate a car as something for your “stuff” category….Unless it’s a classic, like a ’68 vette or something, it isn’t worth much. It’s only worth what someone is willing to pay…

I have trouble determining our net worth because of my pension plan. I do get a “present value” type of update, but it isn’t given in terms of a lump sum; it’s given in the form of what my pension income (in 2019) would be if I stopped working now. As a Canadian teacher, I’m very, very lucky. Long before I had my financial wake-up moment, I was paying into my pension plan month-in-and-month-out – because I had to (definitely not because I was money smart – because I was the opposite). Anyway, while I know what I will be eligible to earn in terms of pension income (as early as July 2019), I don’t know how to factor it into my net worth.

I’m glad they at least forced you to put in that $$$ back then! I wish the would force *everyone* to save whether they want to or not, haha… at least in the first 10 years of the workforce until we can all wise up :)

There really is something to be said for that idea, and it does get put into practice to greater or lesser degrees in different countries. The American value for unbridled freedom is strong, and it works against the “forced” saving model. It’s a tough one to balance: freedom vs. security (in more than just finances).

And here I was wondering if I could include our cars. I usually include things are 1) relatively easy to valuate and 2) would be fairly liquid if I had to pull the cash out of them. I could sell our Tahoe rather quickly, but my childhood baseball card collection, probably not.

That’s a good way of doing it too :) And in which case I’d include my coin collection and silver/gold items as well. Though it is pretty funny – out of everything I’ve tracked over the years in my net worth the *cars* are always the ones that people disagree with haha… Keeps it nice and fun though :)

I have a pension from working for the state. I am required by law to contribute 9% of my check every month to it. I cannot do any more or less than that. The state will put in 7% into the general fund. At 10 years I am vested and I can have everything that has been put in if I leave. Before that time its only what I contribute. I can see what the value of my contributions are every month so I include that into my net worth calculations. I do not include anything the state has included because I have no way of knowing how much that is

Oh wow – that’s awesome you’re forced to put in the 9%! And even awesomer that they match 7% of it!! I think i would do the exact same thing you are in this case then with including in the net worth… and you can probably estimate the state $ too since you know it’s 7%. (But I would still leave out until it’s 100% vested and yours)

What’s funny is I just realized that my wife actually has a small one building up through her new gov’t job – hah! So all this time thinking I’d never need to deal with and then someone in the comments here mentions Federal and state workers get them :)

I used to track my net worth before I started investing in real estate, and when my finances were completely independent. But now that we have 7 properties, it is too hard to know exactly what they are worth and it really doesn’t matter much to me anyway, because a few are paid off and none are under water. Also, I am now more financially entangled with my husband’s finances (not legally married, but probably common law by now). So, we know our general net worth in figures such as $x.x million, but since we’ve hit our number, I don’t get much more accurate with the other 5 zeros, even though we continue to grow our net worth. As far as what I include, it is just properties, retirement accounts and cash. As a minimalist, I don’t have any stuff anymore that I could sell. We also have our monthly expenses covered with our rental income and a pension, so knowing net worth is less important to me these days, and we’ve already hit our numbers. What I get a kick out of these days, is how to bring down expenses as much as possible, which is partly why I sold my car. I’m so much more fascinated these days with seeing people’s monthly expenses and spending rather than their net worth. Maybe you can start a list/club with that. :)

Haha you and the rest of the FIRE world! The expenses part still are my downfall here especially with adding kids to the mix every other year. JUST when I get it lowered again another pops out and messes up my plan :) But VERY cool you guys own 7 properties!!! That’s I lot, i had no idea! And even more so you have a million+ in net worth… you guys are killing it over there. Minimalism for the win!

One of the benefits of baby boomership is having a corporate pension. I’ve been with the same company since graduation and have seen the company reducing the pension benefit, then freezing it and currently eliminating it for new employees. Since the company has been merged and restructured several times my pension consists of a quilt of various benefits: there is a portion that I take as a lump sum or an annuity and two other pieces that I can only take as annuities.

Since I am a nerd, I track several net worth versions. First is total investments, which includes 401k, IRAs, brokerage account and credit union balances. Next I add the value of my house (Zillow seems to be fairly accurate in my area). Next I add the lump sum portion of my pension if I was to take it at the earliest opportunity (December 1, 2017). Next I add the present value of pension annuities (I just use the same ratio as lump sum/its annuity).

For some extra nerdiness I also calculate pension value based on lump sum needed to get the same annuity as my total pension from immediateannuities.com. Oh, and I also calculate all the above after tax.

Over time, when I get close to a round number for any of these net worths, I tend to mentally add anything else of value I can think of, such as my Infinity, Rolex, home theater equipment, change in my pockets, so I can delude myself in reaching that milestone sooner.

I do not include Social Security in my net worth, but I do include it in projected income after retirement.

The first section contains only those accounts/assets that I count directly towards retirement. These are all accounts with easy-to-liquidate assets that I don’t plan to tap until I am retired. This sub-total is what I look at when I see how close I am to “my number”.

The second section contains all my other accounts/assets that I count towards net worth but not retirement. These include Kelly BB on my vehicles, Zillow on my house, and any other accounts or collectibles I want to include. I know the numbers I am tracking on some of these assets are variable and difficult to pin down precisely. But estimated as accurately as I can, they legitimately belong in my net worth calculation. The net worth of my possessions and accounts is not the same thing as what the liquidated value would be. Nor should it be.

If I had a pension, I would probably put it in the first section in my retirement accounts. But only if I were already vested in the balance.

For instance, I will have a SERMA (sheltered retirement medical account) set up for me when I retire. But I don’t consider myself vested until I qualify for retirement. So my spreadsheet tracks the amount, but doesn’t add it to the retirement total until I turn 51 and will be eligible.

If you are using your net worth to see if you have enough to retire, then anything not easily liquidated shouldn’t show up there. That’s why I split it up into two sections.

Ooooh I’m digging that idea… With this route you can account for *everything* no matter where it falls! And not a bad idea in general to be tracking either, just so that your significant other and family knows the general value of the most important stuff too… Maybe I’ll do the same and throw my coin collection and stock options and other things in there just so it’s all down in one main spot like that… you got me thinking!!

I think the trick is to not to try to make the net worth sheet be everything. It’s a good snapshot, but is not an income statement. If you use it to see the general idea, it is okay to include more things. If you are trying to see what your passive income would be, you need to exclude many things.

Net worth is personal. As you mentioned, there’s not a wrong way, just different ways.

When I track our net worth, the house is not counted. But the mortgage reduces our net worth. It’s the number we’d have in addition to a fully paid off house. Why? Because I had figured from early on, that we needed 20-25X our spending in our retirement accounts to be able to retire. Counting a $200K/$500K/$1M house as an asset would throw that number off. Surely the $1M home isn’t giving you a $40K withdrawal each year.

We did retire early, just after my 50th birthday. The kid is off to college (and sr year will be paid 100% with my cc rewards, thx for that mention!) all prefunded, and at some point we might move, hopefully to a smaller house 2/3 the size would be fine, and that would both give us a bit of a windfall, 1/3 the price of our current home, along with a lower cost of living. But since that was never on my spreadsheet, I wasn’t and am not, counting on it.

Now, at 55, and the missus is 62, we are nearing the age of social security. Not an asset, not in our net worth, but it will drop the amount we are tapping savings each year. with SS potential replacing 40% or our preretirement earnings, our ‘number’ drops sharply 8 years, and then 15 years out.

Nothing else counts. Because nothing else provides income. Our daughter can yardsale our furniture, tools, art, cars, etc. This is all stuff that has value, but only when sold. So I’m sticking with “it’s not in my net worth, but it’s extra money for the kid when I’m dead.”

Haha… I like it :) And not a bad way of doing it either – I’d much rather side on being overly conservative like that than the opposite direction! now get your early retired a$$ back to FinCon! We missed you this year!

This might seem a little wonkish, but I think it is important to recognize the impact of taxes on net worth. Here are a couple examples:
* 401k/IRA: when contributing to the 401k, it reduces your current taxes, but you’ll have to pay taxes on withdrawals. Basically, the government owns a piece of your 401k. Recognizing that you’ll have to pay those taxes eventually by reflecting taxes immediately puts the traditional 401k and IRA on the same basis as the Roth. To reflect taxes, I just reduce the value of my 401k by 25%.
* Taxable accounts: Just like a 401k, the government gets a piece of the earnings in your taxable account. This means that if you are sitting on $1,000 in unrealized capital gains, then those are reduced by 15% or $150 for taxes.
* Taxes on interest/dividends/realized gains: I have a special “Tax Liability” account that I accrue each month. As I receive interest payments or dividends, I account for the taxes I’ll have to pay on those by increasing my tax liability. As I withhold money from my paycheck or make quarterly payments, I’ll reduce the tax liability. Accruing a liability also helps with the issue of quarterly payments causing a swing in net worth.

Other thoughts:
* Include the value of the defined benefit pension – it is basically a long bond.
* Include the value of your home. If you didn’t own it, you would need to pay rent. The rent you would pay (called “imputed rent”) is what your house earns.

yup! all good things to consider in the planning process! I don’t factor them into these net worths here as they’re just my “quick fix” to getting a general idea of things, but for the future strategizing/retiring calculations they’re most definitely important to include.

I’m glad you hit on cars. They are something I keep in my net worth spreadsheet that I often wondered if they belong in there. They are paid for beater cars, but their near liquid (1-3 weeks to sell) value represents a significant portion of my net worth right now. I hope to start a Net Worth Tracker on my page soon, because I think it’d be interesting for others to see my progress on a single income.

I’m glad it helped! And of course I’m all for sharing as much as you can with others, as I really do think it helps this stuff sink in more for people. Real life numbers is always easier to learn from than theories!

Hi J. I think it depends on your reasons for calculating your net worth. Many FIRE bloggers seem to be aiming for ~$1m with 4% drawdown for a ~$40k income. In this context, net worth might include those assets that contribute to the ~$1m. In my case, I stopped work 21 months ago aged 57 and my wife stopped work 12 months ago (due to ill health) aged 54. We plan to draw our pensions when we are 60 (only 15 months to go in my case) because they are actuary reduced if we draw them before Normal Retirement Age. In the meantime, we are living off savings and investments. We’re not planning to sell equity in our house to fund retirement, so I wouldn’t include that. If I only include savings and investments, then our net worth wouldn’t be all that impressive (currently about £200k). So, most of our net worth is locked up in our pensions (we maximised our contributions to achieve the best possible pension – I’ll be 3 years and my wife 6 years contributions short of the maximum possible pension based on our final salaries). If I assume our annual pension income is equivalent to 4% of the total pension pot, then I could simply multiply by 25 to estimate the value of the pension pot (and add in the lump sums obviously). Maybe I’ll do that soon, although I’d feel a bit exposed if people I know were to read it – we don’t normally share this stuff in the UK ;-)

I hear ya, brother :) And totally agree that there are a handful of different ways – and reasons – to track this stuff. Whether you start the divulging trend over in your side of the world or not though, please give my regards to the Mrs. for a quick recovery! None of this $$ stuff comes close to the loved ones in our lives :( And hopefully there are many moons for y’all to share in your early retirement!

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